Bank of England to gain new mandate for digital currency innovation

The UK Treasury is preparing to introduce a secondary objective for the Bank of England that would require the central bank to actively support innovation in digital currencies and payment systems.

The measure will be introduced through an amendment to the Financial Services and Markets Bill, scheduled for debate in the House of Lords next month. Under the plan, the innovation mandate will remain subordinate to the BoE's primary responsibility for financial stability.

City minister Lucy Rigby emphasised the balance between priorities: "Whilst financial stability will always remain the bank's primary objective, this secondary objective will support the bank to continue to drive innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services."

The policy shift comes after digital asset businesses criticised the Bank of England for what they characterised as an overly cautious stance toward cryptocurrency and blockchain technologies.

The move coincides with intensified oversight efforts by both the BoE and the Financial Conduct Authority over digital asset markets. Regulators are examining blockchain applications across financial services, including tokenised collateral, tokenised gold, and new settlement models as part of broader financial market modernisation initiatives.

The central bank will be obligated to publish annual reports detailing progress against the innovation objective. This reporting mechanism is designed to ensure the BoE keeps pace with rapid technological developments in digital finance.

Sarah Breeden, BoE deputy governor for financial stability, welcomed the framework: "The bank is doing a huge amount, together with government and other authorities, to maintain trust and drive innovation in UK payments. This new secondary objective will further support that."

The announcement follows the Bank of England's June publication of its stablecoin regulatory framework, which sets rules for tokens pegged to sterling and aims to foster development of regulated pound-denominated stablecoins.

The central bank recently abandoned controversial ownership limits for UK stablecoins — originally proposed to safeguard financial stability — replacing them with a £40bn issuance cap instead. The BoE also reduced the portion of reserves backing stablecoins that must be held in zero-interest deposits at the central bank.

These adjustments are intended to make sterling stablecoin issuance more commercially viable and bring UK regulatory approaches closer to those being developed in the EU and the United States.